Question

How would you treat the following item in estimating a country’s national product?

Sale of an old car

Why are the following not included in the estimation of the national income?

sale of an old car

Answer 1

The sale of an old car is not included in the estimation of national income because it is simply a transfer of ownership of an asset that was produced in a previous year. National income includes only the value of goods and services produced during the current year. If we include the sale of an old car, it would lead to double counting because the car’s value was already included in national income when it was originally produced and sold. But if a sale earns a commission or brokerage, it counts as national income, as it is payment for services rendered that year.